Difference Between Investment and Corporate Banking
It is very important to have a thorough knowledge of the professions that you want to pursue. Knowing both the pros and cons can help in better comparisons of the professions. One should choose the profession carefully as a lot depends on it in life. Investment banking helps in creating capital rather than handling it while corporate banking involves a range of banking services including loans, especially to companies. A career in investment banking would involve being in the limelight and earning more as compared to a career in corporate banking.
What is Investment Banking?
Investment banking involves providing a range of banking services like underwriting, raising capital for companies, issuing securities and facilitating mergers. Investment banks act as an intermediate during raising capital funding. The investment banking basically involves two main sides vis-à-vis the selling side and the buying side. The selling side includes trading securities or monetary gain or portfolio gain and it also involves promoting securities or the research and underwriting while the buying side involves giving sound advice to clients on investment services.
Investment Banking firms are of three types – Bulge Bracket Investment Banks, Middle Market Investment Banks, and Boutique Investment Banking Firms.
What is Corporate Banking?
Corporate banking is also known as corporate financing. Corporate banking caters to large scale companies and businesses. They focus on a variety of banking services like issuing loans, setting up portfolios, helping MNCs by giving them options for lowering their taxes.
We can say that corporate banker closely studies the portfolios of his clients and ensure that financial risks are minimized. There are numerous opportunities for commercial banks. There are many positions for which you can work, for example, Credit Analyst, Loan Officer, Branch Manager, Trust Officer, and mortgage banker.
Investment vs Corporate Banking – Prerequisites
If you are an undergrad, then you should pursue an MBA from a business school and enter the sector of investment banking as an associate. The skills that you would want to inculcate in yourselves would include an in-depth understanding of corporate finance, quick calculation skills, and organizational analysis. Excellent communication skills are a must for a candidate looking forward to a career in investment banking.
A qualification in a subject such as law, business studies, management, accountancy, finance, mathematics or economics can be advantageous, as can an MBA or similar professional qualification for having opportunities in corporate banking. Additional skills required for a career in corporate banking include numeracy skills, ability to solve problems, negotiation skills and ability to work under pressure.
Employment Outlook
There are many positions to acquire in the field of the investment banking sector including:
- Analyst: The Analyst is the basic profile in investment banking. The main roles of an analyst involve creating financial models, perform a company analysis, do due diligence, create pitch books and punch in data. You have to have at least 1-year experience as an analyst before you apply for the post of an associate.
- Associate: The main job roles of an Investment Banking associate are almost similar to that of an analyst except for the additional responsibility of acting as an intermediate between junior and senior bankers. You are required to be an associate for 3 or 4 years before being promoted to the post of Vice President.
- Vice President: Vice President is just one level below the position of managing director. Vice President monitors his associates and performs many crucial tasks in the investment banking sector. The vice president has to hold up his position for a minimum of 2 to 3 years before landing up as a managing director.
- Managing Director: Managing directors are usually highly experienced candidates that represent the firm in foreign countries and in important meetings. He has the power to take all the strategic decisions of the company.
Unlike investment banking, there are no levels in corporate banking but one can work in the following positions:
- Loan Officer: A loan officer decides whether a client is eligible for a loan or not. He monitors the customer’s financial conditions and gives him the best suitable loan for him.
- Branch Manager: Major Job roles of a branch manager are supervising employees, taking care of the smooth selling and delivery of financial services and maintaining business relationships.
- Trust Officer: The main focus of a trust officer is areas like trust services, estate planning, taxes, investment, etc.
Compensation
Recent research shows that investment bankers earn more money than corporate bankers. An analyst in investment banking can earn as much as $70,000 as their base salary. As an associate, your basic compensation would be $100,000. A vice president would earn $250,000.
Entry-level jobs in the corporate banking sector will pay you $30,000 to $40,000 per year. Having three years of experience can result in an increased compensation of $54,000 to $86,000.
Investment and Corporate Banking – Pros & Cons
| Investment Banking | ||
| Pros | Cons | |
| Handsome pay | Long working hours | |
| Limelight | Cutthroat competition | |
| Steep learning curve | ||
| Corporate Banking | ||
| Pros | Cons | |
| Flexible working hours | Compensation is hard-earned | |
| Easy exit options | No appreciation | |
| Defined career path | ||
Investment Banking vs Corporate Banking Video
Conclusion
There is an intense competition in investment banking jobs but a decent salary can compensate this while in corporate banking jobs one can enjoy flexible working hours and there is not much competition but compensation has to be earned and does not come with the degree. It is not easy to choose between both professions.
Those who want to enjoy their weekends over a handsome pay can opt for a career in the corporate banking sector and those who value money and can spend their day and night to get rich must opt for a career in the investment banking sector. Also, there is a chance of being in the limelight and being appreciated in investment banking jobs while corporate banking jobs are dull and you will not get much recognition. The choice is entirely yours to make.
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